Dark Pools

[ecohensha]

I recently read that 40% of all U.S. stocks trade in dark pools. Interactive Brokers states that IB included eight dark pools in its smart routing logic. I've read article on this topic but do not completely understand how dark pools work.


If a trade does not occur on the primary exchange, is that automatically considered a dark pool?


Are trades that occur on broker-dealer-owned dark pools immediately added to daily volume /time of sales, on all platforms such as Yahoo finance, once executed?

 

[mbondy]

I recently read that 40% of all U.S. stocks trade in dark pools. Interactive Brokers states that IB included eight dark pools in its smart routing logic. I've read article on this topic but do not completely understand how dark pools work.


If a trade does not occur on the primary exchange, is that automatically considered a dark pool?


Are trades that occur on broker-dealer-owned dark pools immediately added to daily volume /time of sales, on all platforms such as Yahoo finance, once executed?

Any exchange that is not 'lit' (ie. openly advertises liquidity) would by definition, be dark.

Time and sales reporting guidelines are the same for all exchanges, with few exceptions. All trades executed in the dark are reported, most can be seen as 'nde' on the tape, or some other designation depending on your data provider.

Overall daily volume includes trades executed in the dark.

 

[Sprout]

I recently read that 40% of all U.S. stocks trade in dark pools. Interactive Brokers states that IB included eight dark pools in its smart routing logic. I've read article on this topic but do not completely understand how dark pools work.


If a trade does not occur on the primary exchange, is that automatically considered a dark pool?


Are trades that occur on broker-dealer-owned dark pools immediately added to daily volume /time of sales, on all platforms such as Yahoo finance, once executed?

Flash Boys by Lewis is a good intro into the subject as well as the manipulation that exists from the rise of ecns and hfts from Reg NMS and SIP.
IEX was created to mitigate the actions of bad actors. Great read, better as audio book to have some of the concepts really sink in. Dark Pools is next on my list.

 

[ecohensha]

Any exchange that is not 'lit' (ie. openly advertises liquidity) would by definition, be dark.

Time and sales reporting guidelines are the same for all exchanges, with few exceptions. All trades executed in the dark are reported, most can be seen as 'nde' on the tape, or some other designation depending on your data provider.

Overall daily volume includes trades executed in the dark.

Thank you, thats very helpful. Is it impossible for a NBBO to be taken from a dark pool?

 

[jharmon]

This will show you where the trading is at.

https://markets.cboe.com/us/equities/market_share/

Tape A = NYSE
Tape B = "Regionals" - pretty much NYSE Mkt, NYSE Arca
Tape C= Nasdaq

All dark pool trades need to report into the TRF - but not all such TRF trades come from a dark pool.

 

[mbondy]

Thank you, thats very helpful. Is it impossible for a NBBO to be taken from a dark pool?

No. That would defeat the point. The entire purpose of a dark pool is to hide size and price. An order can get traded-through in the dark if no one routes to the exchange whereas that is not possible on a lit exchange.

What are you up to?

 

[qlai]

All trades executed in the dark are reported

I was under impression that dark pools only required to report trades if their volume exceeds certain threshold. Google is telling me otherwise. Had this changed at some point?

 

[jharmon]

You can get specific per-stock per-dark-pool trading stats here, aggregated on a weekly basis:
https://otctransparency.finra.org/

 

[mbondy]

I was under impression that dark pools only required to report trades if their volume exceeds certain threshold. Google is telling me otherwise. Had this changed at some point?

I've never heard of that.
As far as I know, only block trades and trades that are executed off of an electronic exchange are exempt from immediate reporting requirements - but they still do have to report within specified time frames.

 

[jharmon]

Must report within 10 seconds